Korea, Republic of

The applicable period for special tax concession for foreign employees or engineers has been extended under the latest amendment of the Individual Income Tax Law (‘IITL’). Foreign employees working in Korea may elect to have their employment income subject to a flat tax rate of 19% (rather than a progressive income tax rate with the highest marginal tax rate) for 20 years from the date they start working in Korea. This flat tax rate can be elected for those who initially started to work in Korea not later than the end of December 2026.

Currently, 50% tax-exempt treatment is allowed for wages received by a qualified foreign technician/engineer providing services in Korea to a domestic entity for ten years from the date one starts to render services in Korea. This treatment shall apply for those who start to work in Korea not later than the end of December 2026. In addition, a 70% tax reduction is applicable to wages received by the above qualified expatriate, if one works in the categories of raw materials, parts, and equipment, for the first three years as long as one started to work in Korea not later than 31 December 2022.

Another noticeable change in the recently amended IITL is a new provision that outlines a special withholding treatment concerning non-resident omnibus accounts.  Under the new provision, when a non-resident receives Korean-source income through the non-resident omnibus account, the company paying Korean source income to the non-resident is mandated to withhold income tax upon making the payment.  To avail of income tax exemption, non-taxation, or a reduced rate as per the applicable income tax treaty, the non-resident must initiate the process by filing a tax refund request with the pertinent district tax office.